AutoNation, Inc.

Good morning, my name is Brica and I will be your conference operator for today. At this time, I would like to welcome everyone to the AutoNation fourth quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star then two on your telephone keypad. Thank you. I would now like to turn the call over to Derek Feebig, Vice President of Investor Relations. You may begin your conference.

Thanks, Brieka, and good morning, everyone. I'd like to welcome you to the AutoNation fourth quarter 2020 conference call and webcast. Leading our call today will be Mike Manley, our Chief Executive Officer, and Joe Lower, our CFO. Following their remarks, we'll open up the call for questions. Before beginning, I'd like to remind you that certain statements and information on this call, including any statements regarding our anticipated financial results and objectives, constitute forward-looking statements within the meaning of the Federal Private Security Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks that may cause our actual results or performance to differ materially from such forward-looking statements. Additional discussion of factors that could cause our actual results to differ materially are contained in our press release issued today and in our SEC filings. Certain non-GAAP financial measures as defined under SEC rules will be discussed on this call. Reconciliations are provided in our press release and on our website located at investor.autonation.com. With that, I'll turn the call over to Mike. Yeah, thanks, Eric. Good morning, everyone. Thank you for joining us.

2022 was a great year for alternation and four consecutive record quarters. Tremendous results driven by the entire alternation team, and I know many of you are on the call, so my personal congratulations to all of you. Joe's going to take us through the results in detail, but I'm going to just touch on some of the headline numbers. Q4 new vehicle retail industry was up 2%, with us posting a same-store 4% increase over prior year. used vehicle industry declined by 6%, which in my view was significantly driven by constrained used vehicle inventory, which also was a key driver of our used vehicle sales being down 11% in the quarter. Total revenue up year over year in the quarter to $6.7 billion, bringing our full year revenue in at $27 billion, up 4.4%. So notwithstanding the increased availability of new vehicle inventory in a somewhat choppy used vehicle market, both on the retail and wholesale side, our continued discipline approach to unit margin can be seen in the quarter, particularly in our used vehicle margins. This, combined with another strong performance from our customer financial services team, delivered a total variable per unit margin of more than $6,300, which, despite being down from peak level a year ago, was essentially flat sequentially and an acceptable result, in my view, given the market conditions. Now, coming into the year, we've challenged our after-sales teams to consistently grow their business and their performance, and I'm pleased to report that they are making excellent progress as they deliver double-digit sales growth combined with margin expansion. Now, with well-controlled expenses, which Joe will expand on in more detail, we delivered $1.4 billion of adjusted net income for the year with a margin of 5.2%. So when I look back at 2022, I think you can now consistently see, as we've discussed before, the business drivers that I consider are structural improvements compared to pre-pandemic levels. These are clearly CFS, which is driven by our focus on product penetration, our intense focus on sales effectiveness, our drive for operational improvements in our after-sales business, and finally our SG&A control, all of which have contributed to our record results for the year. Now with a focus on cash conversion, which remained at nearly 100%, we generated strong free cash flow for the year in excess of 1.3 billion, and this gave us significant flexibility to allocate capital in a disciplined way. During the year, we generated 1.7 billion in cash from operations. We invested more than half a billion dollars in our business, which included maintenance projects to ensure continued underlying performance from our core business. organic growth investments, which obviously included the additional alternation USA stores, and the acquisition of key assets to expand our business. In addition, in the year, we returned $1.7 billion to our shareholders. Now, that return to shareholders was in the form of share repurchases, and during the year, we bought back 15.6 million shares at an average price of $110 per share, which I think is an excellent investment in ourselves. And given all our activity and our operational performance, we're able to deliver an adjusted EPS result of $6.37 for the fourth quarter, up over 10% year over year. We often on these calls talk about the future, and I think for the foreseeable future, the retail industry will continue to evolve, including our customers' approach to vehicle ownership and usage. And it's an exciting time, frankly, to be in this segment, and we believe the evolving landscape offers many opportunities. AutoNation already has some excellent assets. First and foremost, of course, is our privilege of representing great OEM brands in strong territories, which has enabled us to transact with over 11 million unique customers from nearly 9 million households, another significant undervalued strength of our company. And notwithstanding the fact that we typically add around 300,000 additional customers per year to our database, we know that within our existing customer base, which, as I've already pointed out, is extensive, There are significant opportunities to grow our business by covering a broader part of the automotive value chain, giving us an enhanced opportunity to reactivate inactive customers, improve our retention of new customers, significantly expand the products and services we offer, and increase the frequency within which we interact with our customers. So as a result, in addition to acquiring a select number of additional dealerships, we made three key acquisitions that were focused on expanding and extending the reach of the AutoNation brand. Last fall, we acquired CIG Financial, creating AutoNation Finance and establishing an in-house CFS solution for current and future customers. This business, in addition to its legacy relationships, is currently focused on servicing used vehicle buyers at our AutoNation USA stores, but will expand to our franchise stores later this year. Obviously, as this business grows, we will have an increasing, more recurring revenue stream. Now, this January, we acquired RepairSmith, a mobile automotive repair and maintenance solution. The acquisition expands our range of services and creates meaningful after-sales business opportunities, including utilizing another channel to provide service to AutoNation's existing customer base and introducing additional vehicle owners who have purchased vehicles outside the AutoNation dealer network. RepairSmith also gives our ANUSA brand a unique service proposition and customer experience, offering a range of after-sales products and services that our standalone used car sales competitors, frankly, just do not have. As you know, we've consistently grown our after-sales business, which is more recurring revenue stream, with a high percentage of customers bringing their vehicles into service under warranty. The rate decreases rapidly after the warranty period ends, And RepairSmith now expands our reach and provides a very convenient means for customers to service their off warranty vehicles. Finally, we also improved our digital retailing experience with an enhanced digital storefront and our collaboration with Trucar. All of these activities are targeted and focused to create a stronger, more competitive business that is less exposed to the cyclical nature of the automotive industry and places us in more control of our destiny. And as I said at the beginning, what a great time to be in this segment. And with that, I'll hand over to Jack. We'll take you through the details of our results.